SCALES RESTAURANT ON WHARF CLOSES
MONTEREY >> Scales Seafood & Steaks, a popular dining establishment on Fisherman’s Wharf in Monterey, has closed permanently with its lease running out on July 31 after negotiations with the city of Monterey broke down, leaving tenants Chris Shake and Sabu Shake Jr. with 90 days to remove property they have brought in since opening in 2014.
Tony Lombardo, an attorney for the Shakes, said they were hoping to negotiate a new lease with the city but the city’s proposal from a few weeks ago increased the percentage rent and its minimum rent making it economically impossible for the restaurant to continue.
But Monterey City Manager Hans Uslar said that the offer was substantially below what the Shakes have been paying to their leaseholder and the city of Monterey in the previous agreement.
“The Shakes were subtenants of the Cerritos, who had the lease,” said Lombardo. “They took over as the operator of the restaurant.”
As subtenants, the Shakes paid rent to both the city and the leaseholder.
In 2014, after two generations of her family owning the area where Gilbert’s on the Wharf stood, Mary Alice Cerrito Fettis decided to sublease her spot to the Shakes. Cerrito Fettis, along with her sister Gloria Brown, have a lease agreement for the property with the city of Monterey that also ends July 31.
Cerrito Fettis said she and her sister petitioned the city to renew the lease but the city of Monterey did not want to enter into negotiations with them. They are the landlord and can choose not to renew a lease or refuse to discuss renewing a lease, she said.
“The City Council tasked the city team to sole source and negotiate with the Shakes,” said Uslar.
Chris Shake said that in October 2020, the city was asked for a proposal since the Shakes were advised the city was going to negotiate with them directly.
“It wasn’t until the very end of May this year that we finally received an offer, two short months before our lease expired on July 31, 2021, and my brother and I had our backs against the wall with very little time left before our lease expired,” said Shake.
In a notice posted outside the now-shuttered restaurant, the Shakes stated the closure was prompted “because of a failed negotiation with the city of Monterey.”
Uslar stated that on July 12, the Shakes submitted an offer that was to go before the Monterey City Council in a July 21 closed session.
On July 16, the Shakes sent a letter saying that after seven years, and with the uncertainty of future labor and rising costs, they wished to withdraw themselves from consideration, according to Uslar.
“We told the city that we were withdrawing from consideration of their proposed lease terms and our attorney Tony Lombardo spoke to the city manager the day of the closed session meeting on Wednesday, July 21, 2021, and told the city manager that we would agree to a new lease of same or similar terms to the Mary Alice (Cerrito Fettis) lease, and Tony reiterated that to the entire council during the closed session public comment,” said Shake.
But that withdrawal deprived the City Council from considering their offer, said Uslar.
The city manager said he did speak with Lombardo but the withdrawal was never taken back.
The lease proposal included a phase-in and the city was asking for market rate, which is required by the city charter. Uslar said the city was willing to work with the Shakes to find a “sweet spot” that would make the operation palatable for both parties.
Other lease agreements with the city will also be based on market rate, which is established using accepted appraisal standards and analysis of restaurants in the coastal corridor up and down the state, and helps determine the minimum rent for restaurants. The percentage rent structure includes a percentage of sales in addition to minimum base rent.
The offer from the city was absolutely fair, said Uslar.
But the Shakes did not see it the same way.
We invested a considerable amount of money in 2014 to remodel Scales and we needed years to recoup that investment, said Shake.
The restaurant owners said they did not leave on their own nor did they want to close the highly popular restaurant.
“We were told that the city was done negotiating with us,” said Shake. “We were not offered to stay on month-to-month to give us a reasonable amount of time and a fair opportunity to help our employees relocate and to deal with moving out or continue with lease negotiations.”
Lombardo said Scales Seafood & Steaks generated three times more income than the previous owner and the restaurant is the second most popular on the wharf after the other Shake-owned restaurant, Old Fisherman’s Grotto.
“Having to go through a pandemic and shutdown for 14 months with limited ability to generate revenue and having to spend thousands of dollars on COVID-19 social distancing protocol requirements and taking care of our employees and their families, we were devastated when we received the news,” said Chris Shake.
Uslar said there is always a chance to come back together but the Shakes have started taking furniture and equipment out of the property.
Uslar said that the city has received interest on that space from several sources but it would have liked to see the Shakes continue there.
About 91 employees of the restaurant have been laid off since the establishment served its final customers at the end of business Sunday.